Brief Multi-Strategy: Container Shipping and Coronavirus – Update and more

In this briefing:

  1. Container Shipping and Coronavirus – Update
  2. Singapore Banks – Pioneer Energy Bankruptcy
  3. BRC Asia Buy Support Post Pullback

1. Container Shipping and Coronavirus – Update

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The short term impact of the coronavirus health crisis is a sharp hit to global container volumes and carrier earnings, but we re-iterate that the medium-term impact will be manageable provided the virus spread is contained.

2. Singapore Banks – Pioneer Energy Bankruptcy

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Oil prices are falling. Singapore banks have high exposure to oil and gas service companies. Pioneer Energy Services Corp in the US, just filed for Chapter 11 bankruptcy protection. We must expect higher risk of defaults for exposures in this sector for Singapore banks, coming at a time with increased risk overall, especially related to tourism, Hong Kong and China. It is a stark reminder of the period some years ago, when suddenly and without warning, DBS Group Holdings (DBS SP) and others reported soaring bad loans from oil and gas service sector.

3. BRC Asia Buy Support Post Pullback

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BRC Asia Ltd (BRC SP) shows some clear tactical topping signals after breaking the rising trendline support with fresh resistance expected to induce a decline back to retracement and price supports that will provide a better risk to reward long entry point for investors in late March if not early April given downside pressure in the global and regional cycle.

The rally in January/February formed bear divergence on tapering buy volume. Bear divergence means that the rise was mature with slowing buy momentum and volume. The good news is recent weakness has been on lower volume which supports the macro bull case and implies this pullback is corrective in nature as long as macro pivot support at 1.42 is maintained.

Macro rally projection lies at 2.25. Buy support comes in near 1.49/1.55.

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